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After seven years with the department, Prof. Dharmapala is leaving us for the University of Illinois, Urbana-Champaign. Hired as an assistant professor in 2002 following postdoctoral positions at Harvard and the Australian National University, he was tenured and promoted to associate professor in 2008. A specialist in public finance who holds a PhD from the University of California, Berkeley, Dharmapala’s interests also encompass tax policy, corporate finance, and the economic analysis of law.

At UIUC, Dharmapala will join the College of Law, which has a substantial group of scholars in Law and Economics. In addition, he will hold an appointment as Professor of Finance (by courtesy) in the College of Business. His wife, Jennifer Delaney, who holds a PhD from Stanford University’s School of Education, will join the faculty of the College of Education at UIUC. We regret the departure of one of our more outstanding professors, and wish him all the best in his new appointment.


Biplab Ghosh recently defended his thesis under the advisorship of Prof. Dharmapala. His research interests lie in financial economics. His dissertation comprised three chapters, the first one tackles the theory that information asymmetry among investors leads to higher asset price volatility for firms. Testing this empirically, he finds that this is indeed the case, especially for small and illiquid firms, and those with a low book-to-market ratio. In the second chapter, he finds that higher firm level asset volatility leads to lower leverage. This can be viewed as a consequence of undiversified managers trying to reduce their own risk. And in the final chapter, he tries to explain the reason for the higher return of firms with high asymmetric information. It appears to originate with news about future cash flows rather than changes in the discount rate.

Ghosh will soon join Gustavus Adolphus College, a liberal arts college in Saint Peter, an hour from Minneapolis with about 2500 students. He will be teaching mostly finance courses in the College’s Department of Economics and Management.

Dhammika Dharmapala (IDEAS) recently published a chapter in a book on tax policy lessons from the 2000s, edited by Alan Viard at the American Enterprise Institute.

In his chapter, Dharmapala finds that the 2003 dividend tax cut triggered a large and immediate increase in dividend payments by firms. The biggest increases occurred in firms whose stockholders were most affected by the tax cut. Dharmapala documents an investment shift following the cut, in which Americans moved their investments out of foreign firms whose dividends did not qualify for the cut and into foreign firms whose dividends did qualify. He concludes that the shareholder-level approach taken by the reform “may be less effective in a financially integrated world economy than measures directed specifically at U.S. firms.”

Additional information about this book is available at the American Enterprise Institute.